U.S. to counter Chinese internet bid in Papua New Guinea - diplomat

SYDNEY, Sept 28 (Reuters) - The United States is working on a counter-offer to stop Chinese telecom giant Huawei Technologies Co Ltd from building internet infrastructure in Papua New Guinea, its top diplomat to Australia said on Friday.

The bid comes two years after Huawei first agreed to build a network there, and as the United States and its allies mount a vigorous campaign to check China's rising influence in the region by deepening their own diplomatic ties and boosting aid.

It also follows Australia shutting Huawei out of contracts to build a national mobile network on security grounds, and blocking it from laying a subsea communications cable from Sydney to PNG and the Solomon Islands.

"We are working on a counter-offer," U.S. Charge d'Affaires James Caruso said on Australian Broadcasting Corp. radio, when asked about reports that Australia, Japan and the U.S. were looking to trump Huawei's PNG project.

"The whole idea is to give alternatives. This is not to say: 'Don't do business with China.' China's offers are out on the table; it's up to us to be competitive," he said, without elaborating on the offer's details.

Representatives of Australia, Japan and Papua New Guinea had no immediate response when contacted by Reuters. Huawei, which denies its equipment is a security threat, had no immediate comment.

The United States has not had an ambassador in Australia since 2016, with Caruso filling in as top diplomat.

The battle for influence in the sparsely populated Pacific, where China has emerged as the second-largest donor, matters because each island state has a vote at forums like the United Nations, and controls swathes of resource-rich ocean.

Internet cabling has taken on a particular strategic significance, with Australia establishing a cabling division in its foreign office, since the volume of data they carry and the possibility of eavesdropping raised national security concerns.

Huawei in 2016 announced it would build a 5,457 km (3,390 mile) network of submarine cables linking 14 coastal towns in the resource-rich South Pacific nation of 8 million people, without providing a construction timetable.

Papua New Guinean Minister for State Investment William Duma told Papua New Guinea's The National newspaper last month that China's Exim Bank would finance the $200 million project.